The Jakarta Post, Jakarta | December 22, 2014
The new administration’s investment push, led by President Joko “Jokowi” Widodo, has turned fruitful but the Investment Coordinating Board (BKPM) aims for more in the future, buoyed by the country’s long-term economic prospects.
Eighteen firms have expressed serious commitment to pouring US$18.7 billion into several priority sectors from October to recently, and new BKPM chief Franky Sibarani said 25 other investors were in the pipeline, without disclosing the total value of their investments. The new government assumed office at the end of October.
Most of the investments made in the past two months were in the five priority sectors set by the BKPM — power generation, labor-intensive industry, agro-commodity processing, maritime and import substitutes — according to the board’s data.
The import-substitutes sector attracted the highest number of investors, which totals five firms, with an investment amounting to $8.5 billion, the data showed. Investment in the import-substitutes sector will be channeled to set up facilities for petrochemicals, automotive components and steel.
“The domestic industry still relies heavily on imports of raw materials, intermediary inputs and capital goods. These new investments will, in the long term, help push down Indonesia’s imports and improve our trade balance,” Franky said.
From January to September this year, imports of raw materials, intermediary goods and capital goods settled at $114.3 billion, accounting for 76 percent of the country’s whole imported goods amounting to $149.7 billion.
In an effort to lure investors by easing investment procedures in Southeast Asia’s largest economy, the government’s investment office recently announced an online license-application system, which allows prospective investors to submit their applications from anywhere without physically visiting the board’s office. Face-to-face meetings will only be applied for troubleshooting or consultation purposes.
Jokowi has pledged that a streamlined model of investment licensing system will be introduced in January under the BKPM, applicable for a wide range of industrial sectors. Currently it can take months or even years to get an investment license because although a similar one-stop service has been applied, many supporting approvals must be obtained from related ministries or government agencies.
Direct investment has been a key contributor to economic growth after domestic consumption in Indonesia, a sprawling archipelago abundant in natural resources, representing 30 percent of its gross domestic product (GDP).
“The efforts to reform the BKPM are already good, but many other things should be done such as guaranteeing availability of basic infrastructure in investment sites and addressing overlapping spatial designs and environmental impact analysis [Amdal] permits,” Institute for Development of Economics and Finance (Indef) executive director Enny Sri Hartati said told The Jakarta Post.
It would still be a daunting task for the government to ensure the investors realize their plans, according to Enny. However, investment in the five priority sectors fit the needs of the country, she added.
Pulling sizeable investment to drive growth is now an increasingly major challenge for the new government as the economy has so far this year expanded slightly above 5 percent, its slowest pace in nearly five years.
The board aims to record Rp 932.9 trillion ($74.65 billion) in investment within the next five years, as part of the new government’s economic growth push to boost GDP growth by 7 percent before its term ends bolstered primarily by infrastructure, agriculture and industrial sectors, as well as reform in key economic sectors such as the energy and mining.
Up to the end of the third quarter, the country had realized Rp 342 trillion of investments, inching near to the Rp 456 trillion targeted for this year, a 15 percent rise from last year.